Token Curated Registries: An Experiment in Game Theory, Part 1
At first glance, Token Curated Registries (TCRs) might seem unimpressive compared to other blockchain projects out there. While other projects are attempting to reinvent the sharing economy and create self-sovereign digital identity, TCRs are attempting to create better lists.
Even if you are unimpressed with the use case, TCRs are a very important experiment with big implications for the future of cryptocurrency, which is why a lot of people are paying close attention.
When we think about the magic of cryptocurrency, we often focus on the math or software side of the technology. Game theory is often overlooked. It is important to keep in mind that the best cryptography and bugless code will not lead to a successful protocol if the underlying incentive structure is off. This is why Bitcoin and Ethereum feel like unstoppable forces and what allows them to operate without the need for a central entity.
The goal of Token Curated Registries is to develop an ecosystem that is able to exist without the need for a central entity or even the creators themselves. If successful, this will be one of the first self-sustaining ecosystems other than mainnet protocols like Bitcoin and Ethereum.
Desired Outcome of TCR Game Theory
When someone claims that a cryptocurrency has good game theory, they are suggesting that all participants are properly incentivized to act in a way that reinforces the intended purpose of the protocol. The game theory of Token Curated Registries aims to align token holder incentives in order to produce lists that are valuable to consumers. These registries (lists) can be anything from a list of the best cafés in San Francisco to a list of NGOs that responsibly spend your donations.
The theory of TCRs is that if we can correctly align the incentives of token holders, we can produce lists that are as close to the objective truth as possible. TCRs might outclass lists found online that are either ingrained with the biased opinion of a single blogger or that are tainted by companies whose goal isn’t to tell the truth, but to generate profit. The TCR aims to maximize the experience of the consumer.
Aligning Incentives
In order to achieve this alignment of incentives, TCR creators have to structure a system where the quality of the curated list is highest when token holders are acting completely out of their financial self interest. In order to get the game theory right, it is really important that we never rely on people acting altruistically or out of kindness. We must always assume that someone will always take the opportunity to generate profit even if their behavior goes against the goal of the system (in this case, the TCR).
If we ever find ourselves in a situation where someone is able to generate a profit in a way that doesn’t reinforce the goal of a TCR, the solution is to restructure the financial incentives. We must make the generation of a quality list the most logical objective for someone whose only goal is to profit financially.
If TCRs can achieve this, we can create an ecosystem that is both self-sustaining (doesn’t need a central entity) and that delivers value to the consumer.
Part 2
Click here for Part 2. Part 2 goes over what the TCR curation process looks like and also discusses the underlying game theory behind that process.
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Citations/Resources/Learn More
These were the main articles I used to inform what I discussed in this series of articles.
- The Token Curated Registry Reading List — Medium
- Token-Curated Registries 1.0 — Mike Goldin
- Token Curated Registries 1.1, 2.0 TCRs, new theory, and dev updates — Mike Goldin
- The Adchain Registry Whitepaper — Mike Goldin, Ameen Soleimani, James Young
- District0x White paper, pg. 11
- City Walls & Bo-Taoshi: Exploring the Power of Token-Curated Registries — Simon de la Rouviere
